Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine
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Investor Commitment Tested by Deep Crisis:
Banking Development in Ukraine
Ukraine’s banking sector was strongly hit by the global economic crisis which began in Stephan Barisitz,
September 2008 and triggered an extreme output contraction (–20%) in the first quarter of Mathias Lahnsteiner1
2009 and a sharp depreciation of the Ukrainian hryvnia (–35%). Loss of confidence in the
banking sector and deposit withdrawals (about one-fifth of total deposits) were reined in by
large-scale liquidity support by the National Bank of Ukraine, administrative measures and
macroeconomic adjustment (unwinding of the current account disequilibrium) in the spring of
2009. However, credit growth (month on month) ground to a halt in early 2009 and confidence
in the hryvnia remains fragile in a situation where about 50% of private sector credit stock is
denominated in foreign currency. The authorities’ bank recapitalization program, assisted by
the structural conditionality of an IMF Stand-By Arrangement, should help banks cope with
the persisting deep recession and strongly rising nonperforming loans. While political instabi-
lity in the run-up to the presidential election early in 2010 could yet derail bank rehabilitation,
credit institutions have substantially raised provisioning and started cutting costs and restruc-
turing overdue loans. Continuing support by international financial institutions and sustained
commitment by foreign (including Austrian) parent banks and corporations also represent key
stabilizing factors.
JEL classification: G21, G28, P34
Keywords: Banking sector, banking crisis, credit boom, credit crunch, nonperforming loans,
political instability, recapitalization, shock-absorbing factors, Ukraine
1 Macroeconomic Background1 those of other countries in the region,
Before Ukraine was hit by the global and the Ukrainian hryvnia depreciated
financial crisis in late 2008, the econ- sharply. Against the background of
omy showed signs of overheating char- tightened external financing conditions
acterized by skyrocketing but volatile and the outlook of a severe slump in
steel export prices, soaring wages and foreign demand from Russia in particu-
private consumption, strong capital lar, but also from other countries, the
inflows, a credit boom, high inflation government agreed on a two-year USD
(almost 30% in mid-2008) and a wid- 16.4 billion standby loan with the IMF
ening current account deficit. The in- in late October 2008. IMF assistance is
creasing fragility of the country’s earmarked for balance-of-payments
external position as well as persistent support. Disagreements over several
political instability seem to have been issues included in the IMF program
the main reasons why Ukraine has been (i.a. concerning the budget deficit)
among the countries hit hardest by the resulted in a delay of the disbursement
crisis. of the second tranche of the standby
Following the escalation of the credit in February 2009 and tempor-
global financial turmoil after the default arily heightened pressures on the
of Lehman Brothers in September 2008, Ukrainian financial market, but were
Ukraine’s terms of trade plunged, capi- resolved two months later.
tal flows reversed, eurobond spreads Following an 8% real GDP contrac-
and capital default swap (CDS) premi- tion year on year in the last quarter of
ums rose by a far greater extent than 2008, the Ukrainian economy shrank
1
Oesterreichische Nationalbank, Foreign Research Division, stephan.barisitz@oenb.at; mathias.lahnsteiner@oenb.at.
The authors acknowledge valuable comments by an anonymous referee and by Thomas Reininger (OeNB).
FINANZMARKTSTABILITÄTSBERICHT 18 – DEZEMBER 2009 69Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine
Table 1
Selected Macroeconomic Indicators
2005 2006 2007 2008 Q1 09
Real GDP growth (annual change, %) 2.7 7.3 7.9 2.1 –20.3
GDP deflator (annual change, %) 24.5 14.8 22.7 29.1 22.4
Inflation (period average, CPI, annual change, %) 13.5 9.1 12.8 25.2 17.8 1
Inflation (end-of-period, CPI, annual change, %) 10.3 11.6 16.6 22.3 15.0 1
Budget balance (general government, % of GDP) –1.8 –0.7 –1.1 –1.5 ..
Current account balance (% of GDP) 2.8 –1.5 –3.7 –7.2 –3.5
Net FDI inflows (% of GDP) 9.0 5.3 6.6 5.4 4.0
Total gross external debt
(% of four-quarter rolling GDP) 47.7 48.3 53.7 59.7 63.8
Gross external debt of the banking sector
(% of four-quarter rolling GDP) 7.4 12.5 20.2 22.8 24.2
Reserve assets (% of four-quarter rolling GDP) 23.4 19.7 21.2 18.2 16.3
Source: NBU, State Statisitcs Comittee of Ukraine.
1
January to June.
by 20.3% year on year in the first Ukraine (NBU), and the IMF support
quarter of 2009.2 In an environment of program in place – seems to have con-
collapsing domestic demand, inflation tributed to some currency stabilization
gradually came down and the current in recent months. However, this stabil-
account – also supported by a 35% nom- ity remains tenuous, as witnessed by a
inal effective depreciation of the hryv- depreciation of the hryvnia by about
nia from September 2008 to March 15% against the U.S. dollar and the
2009 – adjusted rapidly. This correc- euro from early July to mid-September.
tion, in turn – together with foreign The NBU cut key policy interest rates
exchange interventions, moral suasion by 1 percentage point to 11% on June
and the imposition of some administra- 15, 2009, and by 0.75 percentage points
tive measures by the National Bank of to 10.25% on August 12, 2009.
Table 2
Banking Sector Structure
2005 2006 2007 2008 H1 09
Number of banks (of which partly foreign-owned),
end-of-period 186 (23) 193 (35) 198 (47) 198 (47) 198 (51)
Total banking sector assets (% of four-quarter roll-
ing GDP) 48.4 62.5 83.2 97.5 91,5 1
Total banking sector capital (% of four-quarter
rolling GDP) 5.8 7.8 9.7 12.6 11.9
Share of state-owned banks in total banking sector
assets (%) 9.3 8.8 8.0 11.4 15.6
Share of foreign-owned banks in total banking sec-
tor assets (%) 19.0 32.0 37.2 46.5 47.0
Source: NBU, Raiffeisen Research.
1
First quarter.
2
According to an estimate of the State Statistics Committee, Ukrainian GDP fell 18% year on year in the second
quarter of 2009.
70 FINANZMARKTSTABILITÄTSBERICHT 18 – DEZEMBER 2009Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine
Table 3
Selected Banking Sector Stability Indicators
2005 2006 2007 2008 20091
Credit risk
Loans to the private sector
(% of four-quarter rolling GDP)2 32.5 45.1 59.2 77.3 75.8
Real growth of loans to the private sector
(annual change in %) 46.8 53.2 49.3 40.6 19.9
Real growth of loans to the private sector
(exchange rate-adjusted, annual change in %) 0.0 0.0 48.4 9.9 –6.6
Loans to households
(% of loans to the private sector) 24.9 33.4 37.6 38.2 35.6
Overdue and doubtful loans (% of total loans) 2.2 1.7 1.3 2.3 5.4
Nonperforming loans3 (% of total loans) 19.6 17.8 13.2 17.4 29.9
Market and exchange rate risk
Foreign currency loans to the private sector
(% of private sector loans) 43.3 49.5 49.9 59.1 53.3
Foreign currency loans to households
(in % of loans to households) 57.1 62.6 63.6 71.9 71.9
Foreign currency deposits of the private sector
(in % of private sector deposits) 34.9 38.2 32.2 44.2 44.2
Deposit rate (% p.a.)4 8.5 7.6 8.2 9.9 15.9
Lending rate (% p.a.)4 16.0 15.1 13.9 17.6 27.0
Liquidity risk
Private sector deposits
(% of four-quarter rolling GDP) 30.1 33.9 38.8 37.6 33.1
Real growth of private sector deposits
(annual change in %) 45.1 24.4 30.2 4.4 –14.6
Real growth of private sector deposits
(exchange rate-adjusted, annual change in %) 0.0 0.0 29.3 –12.1 –29.2
Loan-to-deposit ratio (%) 108.0 133.1 152.6 205.5 226.6
Liquid assets (% of total assets) 23.3 20.1 19.7 14.1 14.8
Liquid assets (% of short-term liabilities) 40.2 37.8 39.9 33.0 32.6
Short-term liabilities (% of total liabilities) 58.1 53.1 49.3 42.7 45.3
Banks’ external liabilities (% of banks’ total liabilities) 13.6 21.4 28.1 32.8 29.8
Share of short-term external debt
(% of banks’ total external debt) 50.5 45.9 37.9 23.7 17.6
Profitability
Return on assets (ROA, %) 1.3 1.6 1.5 1.0 –3.3
Retun on equity (ROE, %) 10.4 13.5 12.7 8.5 –24.5
Cost-to-income ratio (%) 63.8 58.1 58.4 50.1 49.6
Shock-absorbing factors
Capital adequacy ratio (%) 15.0 14.2 13.9 14.0 14.5
Specific provisions to nonperforming loans
(% of total loans)3 4.9 4.1 3.5 5.2 8.9
Specific provisions to nonperforming loans
(% of nonperforming loans)3 25.0 23.1 26.3 29.6 29.8
Memorandum item
Direct cross-border loans to the nonbank private
sector (% of four-quarter rolling GDP)5 13.3 15.3 14.8 24.2 24.4
Source: NBU, IMF, IFS, OeNB calculations.
1
June 2009, figures in italics: March 2009.
2
The private sector comprises households and enterprises.
3
According to IMF calculations. Nonperforming loans are those classified as substandard, doubtful and loss.
4
Weighted average over all maturities.
5
Excluding trade credit.
FINANZMARKTSTABILITÄTSBERICHT 18 – DEZEMBER 2009 71Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine
2 Banking Developments during dence on foreign funding (including, in
the Global Financial Crisis particular, funding by nonparent
2.1 Strong Credit Boom sources) left Ukrainian banks more
(up to late 2008) sensitive to balance sheet and liquidity
The very swift Ukrainian banking risks triggered by external shocks.
sector expansion in recent years was Soon after the outbreak of the U.S.
driven by the favorable pre-crisis subprime crisis (August 2007), bank
domestic and external environment and corporate eurobond issuance dried
and by strong pent-up demand for up in Ukraine; banks’ external funding
banking services. Domestic loans to shifted to loans, mostly from parent
the private sector increased from about banks, and slowed down. The loan-to-
one-third of GDP at end-2005 to over deposit ratio skyrocketed to around
three-quarters of GDP at end-2008. In 200% in 2008.
addition, direct cross-border loans (ex-
cluding trade credit) to the private sec- 2.2 Serious Repercussions of the
tor almost tripled in U.S. dollar terms Global Financial Crisis
during this period and reached one- (since late 2008)
quarter of GDP at end-2008. As the The strong impact of the global finan-
banking sector’s external debt also rose cial crisis on the Ukrainian economy
sharply, foreign liabilities grew to about weakened the environment for bank-
one-third of the banking sector’s total ing. Although Ukraine was shut out of
liabilities at end-2008. Foreign-owned international capital markets, direct
banks increasingly penetrated Ukraine: credit lines, predominantly stemming
Their share in total sector statutory from parent banks and corporations,
capital rose from about 20% at end- were largely rolled over. In this fragile
2005 to 37% at end-2008. Lower in- situation, bad corporate governance
terest rates on foreign currency loans, apparently contributed to a run on the
incentives to exploit the interest rate sixth-largest Ukrainian bank in Octo-
differential provided by the de facto ber 2008, which was quickly reined in
peg of the hryvnia to the U.S. dollar by a substantial NBU liquidity injection
and capital inflow-induced apprecia- (about EUR 700 million). Given the
tion pressures contributed to the in- high proportion of foreign currency
creasing dollarization of lending in loans in the Ukrainian banking system,
Ukraine. Driven by retail (notably the sizeable depreciation of the hryvnia
mortgage) lending, the share of foreign in the final months of 2008 led to sig-
currency loans (mostly U.S. dollar-de- nificant deterioration in the repayment
nominated) to the private sector rose of loans. All these factors gave rise to a
from an already relatively high level of general loss of confidence in banks,
43% to almost 60% in the period of which triggered a drain of about one-
observation. fifth of private sector deposits (over
The sheer speed of the credit boom one-quarter of hryvnia-denominated
heightened credit risk and strained deposits and almost one-fifth of foreign
banks’ risk management practices, currency-denominated deposits) be-
while the currency composition of tween end-September 2008 and end-
loans reflected high and rising foreign March 2009.
exchange risk (indirect credit risk), The stabilization of the Ukrainian
particularly with respect to unhedged currency in the early months of 2009 as
borrower households. Increased depen- well as the NBU’s resort to a package of
72 FINANZMARKTSTABILITÄTSBERICHT 18 – DEZEMBER 2009Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine
banking-related emergency measures In a sign of rising liquidity preference,
helped to (temporarily) stabilize the sit- banks appear to be increasingly placing
uation in the Ukrainian banking sector: available liquidity in NBU correspon-
Large-scale liquidity support compris- dent accounts or investing it in short-
ing refinance credits amounting to term government bonds (OVDPs). Due
some 7.5% of GDP was extended by to the sharp decline in deposits, the
the NBU. Controls were imposed on loan-to-deposit ratio rose further,
the withdrawal of time deposits ahead reaching to the very high level of
of the respective maturity date (these 226.5% by end-June 2009.
controls were lifted in May 2009), tight Given the depreciated hryvnia and
restrictions applied to retail as well as the slump of Ukrainian economic ac-
wholesale foreign currency lending, re- tivity, nonperforming loans (according
serve requirements were effectively to IMF calculations) doubled to 29.9%
eliminated and the deposit guarantee of total loans in the period from Sep-
level was adjusted from EUR 5,000 to tember 2008 to June 2009. During the
EUR 15,000. Thus, the drain of private same time, specific provisions to non-
sector deposits was stopped in March performing loans more than doubled to
and April 2009 and there have been 9% of total loans. Accordingly, profit-
some modest deposit inflows since. ability – already relatively feeble in
From end-March to end-June 2009, earlier years – plunged into negative
private sector deposits increased by territory (June 2009: ROE –24.5%).
0.7%, (or by 1.8%, after exchange rate Some recently imposed administrative
adjustment3)4. restrictions may help stabilize the
Banks’ reduced funding, authori- hryvnia, but effectively require banks
ties’ foreign currency lending restric- to maintain an open foreign exchange
tions and tighter lending standards, as position equal in size to their foreign-
well as the deep recession and the re- currency denominated loan loss provi-
sulting lower demand brought credit sions. In another reaction to the crisis,
growth to a halt in early 2009, with some banks have cut costs drastically,
sharp contractions in consumer and selling or shutting down retail branches
mortgage lending. Total private sector and slashing staff.
credit contracted by 2.4% from end- The authorities’ recapitalization
2008 to end-March 2009 (or by 1.2% program is linked to the IMF Stand-By
after exchange rate adjustment). While Arrangement by some elements of
hryvnia loans have shown some timid structural conditionality, including the
signs of recovery since March 2009,5 issuing of legislation laying out the
foreign currency-denominated loans terms of financial support to banks, the
have continued to shrink in recent completion of diagnostic studies cover-
months. Total private sector loans ing systemically important credit insti-
declined by 0.3%, from end-March tutions, the formulation of problem
2009 to end-June 2009, but grew by bank resolution strategies and the adop-
2.9% in exchange rate-adjusted terms. tion of legislative amendments associ-
3
Exchange rate adjustment implies that exchange rate effects which increase or decrease the stock of foreign currency-
denominated credits expressed in hryvnia terms are eliminated from the calculation.
4
However, in July and August 2009 Ukrainian households’ hryvnia deposits were again flowing out of the sector
against the backdrop of renewed depreciation expectations.
5
This recovery partly appears to be driven by stepped-up lending by state-owned banks to state-owned entities.
FINANZMARKTSTABILITÄTSBERICHT 18 – DEZEMBER 2009 73Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine
ated to the banking resolution mea- contraction of GDP, a 25% drop in
sures and to the requirement to dis- house prices and a 30% hryvnia depre-
close the ultimate owners of banks. ciation, and revealed large capital defi-
These conditions have been met. Out- ciencies in the banking sector (about
standing issues include the implementa- EUR 4.4 billion, 38% of total banking
tion of consolidated supervision and the sector capital at end-2008). In the light
publication of detailed information on of more recent developments, the stress
banks, in particular detailed balance test assumptions appear to be some-
sheets and income statements. No IMF what optimistic. After the recapitaliza-
funds are earmarked to finance the re- tion of the two state-owned credit in-
capitalization program. To secure fund- stitutions in early 2009 (EUR 1.4 bil-
ing for recapitalizing banks, authorities lion), shareholders of most private
requested an USD 750 million loan banks, including all foreign-owned
from the World Bank. All conditions banks, started to inject the capital
for the first tranche of USD 400 mil- deemed necessary. Accordingly, strong
lion were fulfilled in late August 2009 FDI inflows were recorded in April
and the disbursement will be made af- 2009. However, shareholders of five
ter approval by the World Bank Board domestically-owned and systemically
of Directors. important banks6 as well as of a number
Carried out in late 2008, the above- of smaller banks have been unable to
mentioned diagnostic studies were raise, or initiate the raising of, addi-
based on stress tests assuming i.a. a 9% tional capital. The authorities therefore
Chart 1
Banking Sector Developments since 2005
Private sector loans and deposits Nonperforming loans1 and provisions
% of GDP % of total loans
90 35
80
30
70
25
60
50 20
40 15
30
10
20
5
10
0 0
2005 2006 2007 2008 Q1 09 2005 2006 2007 2008 H1 09
Total loans to the private sector Nonperforming loans
Total deposits of the private sector Specific provisions to nonperforming loans
Foreign currency loans to the private sector
Foreign currency deposits of the private sector
Source: NBU, IMF, OeNB calculations.
1 According to IMF calculations. Nonperforming loans are those classified as substandard, doubtful and loss.
6
The technical criteria for defining systemically important banks were agreed upon by the Ukrainian authorities,
the World Bank and IMF staff members.
74 FINANZMARKTSTABILITÄTSBERICHT 18 – DEZEMBER 2009Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine
decided to take control of and recapi- ruptcy, mergers and acquisitions proce-
talize these five systemically important dures. In June 2009, the NBU put 15
problem institutions (their recapitaliza- banks into temporary administration.
tion needs are calculated at EUR 2.3 As a result, in the 12 months to end-
billion, based on an update of the diag- June 2009, the share of state-owned
nostic studies’ results). Smaller prob- banks in the sector’s total assets almost
lem banks are to be resolved by bank- doubled to 16%.
Box
Austrian Banks’ Activities and Experience in Ukraine1
During the past five years, four banks operating in Austria (RZB, Bank Austria, Erste Bank
and ÖVAG) have acquired subsidiaries in Ukraine in order to profit from the thriving Ukrainian
economy. As of the end of the second quarter of 2009, those subsidiaries held total assets of
EUR 10.5 billion (approximately 13% of the overall banking sector in Ukraine), which were
made up primarily of loans. In the past, the Ukrainian banking market was characterized by
a high demand for foreign currency loans, which was spurred by the quasi-peg of the Ukrainian
hryvnia to the U.S. dollar. Austrian parent banks have provided the necessary hard currency
funding, with the result that more than 60% of subsidiaries’ loans were granted in foreign
currencies. After the sharp depreciation of the hryvnia in the second half of 2008, foreign
currency loans now account for more than 70% of the total value of loans.
At the end of the second quarter of 2009, Austrian banks’ subsidiaries in Ukraine had
issued loans to nonfinancial corporations and households worth approximately EUR 9.3 billion,
while the cross-border direct lending exposure of Austrian parent banks to Ukrainian private
nonbanks amounted to EUR 1.08 billion. Austrian subsidiaries’ semiannual lending growth
rates were in the double digits for 2007 and the first six months of 2008. In contrast, the sec-
ond half of 2008 featured a marked slowdown in lending growth (+4.4% from end-June to
end-December 2008 on a currency-adjusted basis), and the first six months of 2009 exhibited
the first decline in gross loan books (–5.7% from end-December 2008 to end-June 2009,
currency-adjusted), which reflects the cautious business policy of Austrian banks in the current
situation. This is no peculiarity of Austrian subsidiaries in Ukraine, as the country in general
constitutes an extreme case of rapid lending growth followed by a standstill in credit markets.
However, Austrian banks have remained committed to their Ukrainian subsidiaries. This is
i.a. evidenced by the fact that the amount of interbank lending from Austrian parent banks
has slightly increased from EUR 4.599 billion in September 2008 to EUR 4.610 billion as at
June 2009.
One reason for the careful stance of Austrian banks in Ukraine might be the deteriorating
asset quality, which becomes apparent in the latest reports of their Ukrainian subsidiaries.
During the first two quarters of 2009, the number of nonperforming loans increased sharply,
reaching 10% to 20% of total loans, depending on the structure of individual banks’ loan port-
folios. The share of restructured loans is close to one-third of the entire loan book, as one
Ukrainian subsidiary of an Austrian bank reports – a fact which bodes ill for the future path
of nonperforming loans.
In the current crisis, Ukraine is presumably the most challenging market for Austrian
banks in CESEE, because it is characterized by an extremely difficult macroeconomic situation
combined with a complicated political environment. Moreover, the National Bank of Ukraine’s
efforts to stabilize the national currency at times create some regulatory uncertainty.
1
Author: Stefan Klocker, Financial Markets Analysis and Surveillance Division, stefan.klocker@oenb.at.
FINANZMARKTSTABILITÄTSBERICHT 18 – DEZEMBER 2009 75Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine
3 Conclusion: Assessment of ward from –9%) and recover only hesi-
Current Risks tantly in 2010 (+1%). In such an envi-
Looking ahead, a lot will depend on the ronment, credit risk will rise further,
further development of the external owing to looming large-scale corporate
environment, especially with regard to defaults and households’ strained debt-
external demand, terms of trade and servicing capacity, given increasing un-
external financing conditions. employment and downward pressure
on wages. Especially the corporate sec-
3.1 Political Instability-Induced Risks tor has to service both loans taken out
A clearly endogenous shock could be at domestic banks as well as direct
triggered by political turbulences in the cross-border loans.
run-up to the presidential elections Foreign currency-denominated loans
scheduled for January 2010. The IMF (more than 50% of private sector
Executive Board approved the release credit) are particularly exposed to de-
of the third tranche of the IMF standby fault risk after the substantial deprecia-
credit in late July 2009; the next tion of the Ukrainian currency, which
review, however, which will take place points to elevated indirect credit risk.
in November 2009, may be compli- In this context, the high share of for-
cated by power struggles among politi- eign currency-denominated credit to
cal leaders. Should the disbursement be – probably mostly unhedged – house-
delayed (as in February 2009), a decline holds (more than 70% of total credit to
in market confidence in the hryvnia households) is a special source of con-
and renewed depreciation are possible cern. The foreign exchange market and
consequences. After the recent stabili- trust in the hryvnia remain fragile (as
zation of deposits, this could also lead exemplified by the most recent bout of
to a renewed erosion of depositors’ instability despite continuing exchange
confidence in banks, triggering another controls). All the factors mentioned im-
round of withdrawals and heightening ply a further deterioration in asset qual-
liquidity risk. Moreover, this would ity and nonperforming loans are ex-
further increase already elevated indi- pected to increase further. Debt re-
rect credit risk, given the prominent structuring – which was initiated in
role of foreign currency-denominated recent months and has, apparently, al-
loans in the Ukrainian banking sector. ready produced some positive results –
A shock (e.g. a further depreciation of remains an important task for banks to
the hryvnia plus another “wave” of the counter defaults.
financial crisis) could also happen after
the elections. 3.3 Important Shock-Absorbing
Factors
3.2 Severe Recession Compounds While the outlook appears tough, the
Existing Vulnerabilities Ukrainian banking sector still boasts
Even if there are no further shocks, the shock-absorbing capacities. So far, pro-
overall environment for banking sector visions have held their ratio to expand-
activities will remain challenging in view ing nonperforming loans (with this ra-
of the severe recession the Ukrainian tio having even risen slightly from 26%
economy has entered. According to the in September 2008 to 30% in June
latest forecast issued by the World Bank 2009) and capital adequacy has re-
in mid-July 2009, real GDP will con- mained on a satisfactory level (July
tract by 15% in 2009 (revised down- 2009: 15.6%), thanks to the recapital-
76 FINANZMARKTSTABILITÄTSBERICHT 18 – DEZEMBER 2009Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine ization measures already undertaken mains on track. Its support by interna- and to a tendency of shrinking assets. tional financial institutions and the In recent years, the structure of banks’ strong commitment displayed by for- external liabilities has improved inas- eign parent banks also represent key much as the share of long-term debt stabilizing factors. It is noteworthy that rose to 82% in March 2009. However, with the help of coordinated interna- given the size of previous currency de- tional support a systemic banking crisis preciation and the depth of the current in Ukraine has been prevented so far economic slump, it cannot be excluded despite the depth of the overall eco- that additional systemically important nomic and financial crisis, which is en- credit institutions turn insolvent. couraging for the future notwithstand- Therefore, it is important that the au- ing the risks outlined above. thorities’ recapitalization program re- References Astrov, V. 2009. Ukraine: Back to External Equilibrium. In: Current Analyses and Forecasts No. 4. wiiw. 116-120. Demel, W. and J. Sikimic. 2009. CEE Banking Sector Report: Rough Playing Field … Committed Players. Raiffeisen Research. IMF. 2008. Ukraine: Request for Stand-By Arrangement – Staff Report. IMF .2009. Ukraine: Second Review under the Stand-By Arrangement and Request for Modi- fication of Performance Criteria – Staff Report. National Bank of Ukraine. 2009. Statistical Bulletin June. Sologoub, D. 2009. Economic & Risks Monitoring Review Monthly: May, June and July. Raiffeisen Bank Aval. FINANZMARKTSTABILITÄTSBERICHT 18 – DEZEMBER 2009 77
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